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Why I think this FTSE 250 stock is a top buy for any portfolio

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When you think of the gaming industry nowadays, you tend to think of computer games. Platforms such as XBox, Playstation and PC gaming spring to mind.

But Games Workshop (LSE:GAW), the British manufacturer of miniature figurines, war games and fantasy figures, is setting the gaming world alight in another part of the gaming sector. It currently possesses two well known products, Warhammer 40,000 and Warhammer Age of Sigmar

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The Nottingham retailer and model manufacturer has been a sleeper success story with its shares more than doubling in the past year as its Warhammer franchise goes from strength to strength. The number of people logging on to Warhammer-community.com was up 48% in the latest six-month period, with fans returning to the site more frequently these days.

Recent results

It announced record sales and profits in a six-month trading update last month.

Shares in the firm jumped after it said pre-tax profits increased by 44% to about £58m over the six months to 1 December. It added that sales in December were in line with the board’s expectations and that the business was “in great shape”.

The firm reported a 19% jump in sales for the period to £148m, ahead of the company’s previous guidance.

Games Workshop was largely boosted by strong growth in its trade division, which saw sales increase 23.9% to £76.1m. It said this was driven by the addition of 200 new trade accounts as it increased supply to independent retailers.

CEO Kevin Rountree was understandably upbeat and said: “We are pleased to once again report record sales and profit levels in the period. The global team have worked their socks off to deliver these great results.”

The great results are very much bucking the trend of doom and gloom seen on the rest of the British high street.

Meteoric rise

The business has been a major success story for investors in recent years, with the shares surging by more than 1,000% over the past five years.

I feel it has a low risk attached due to its focus on physical models and board games. One of the key factors behind its success it that it is able to listen to customers and fans in-store to ensure products succeed. If its products are not doing well, it is able to show flexibility and make changes. 

It is expanding internationally with the US and Germany as key locations for new stores. In fact, it now has more stores in both North America and mainland Europe than it does in the UK

Next steps

Games Workshop is in a quite unique position in my opinion. It has managed to sustain existing business, grow a new following and develop into an international operation too. 

Revenue and profit has been up year-on-year in each of the past four years and the dividend per share has also been steadily climbing. The price-to-earnings ratio sits close to the 30 mark which will have some people believing it to be overvalued, but not me.

Rather than a traditional product, it is selling an experience. As well as that, it is selling itself well to investors through its ongoing success, as its share price rises prove.

I believe Games Workshop is a top growth pick for any portfolio and I do not believe the naysayers who think it has already peaked. 

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Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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